I went to the art show Saturday evening and talked with several people I have known from Clifton having lived there so many years. I did not win any awards for either of my 2 paintings that were in the art show. It is, nevertheless, nice to have your work displayed so the public can see what you are doing. My art work, my political satire art work, is not going to create much interest in Cincinnati. However, I will continue to do it as the mood moves me. I have tried other subjects and will continue to try new ones, but until I am moved to do something vastly different, I will continue to paint those ideas I like.
The election season is upon us and I really have nothing new to write about. I have had my say about what I thought would go a long way towards moving the domestic economy forward. Credit is very basic to our economy and the securitization of individual credit is a tool that can move the economy forward. Unfortunately, that tool was abused and the necessary repairs have not taken place to make that tool (securitization) a viable tool again.
The credit rating agencies play a essential role in the movement of credit, and the job they did during the recent housing bubble and financial disaster have left this tool (securitization) disabled. Those with influence that could have demanded the repair of the credit rating agencies have not stood up for reform. As a result, housing will continue to be a drag on the economy rather than stimulus. Eventually, Wall Street will figure this out and repairs to the system will then be made. After watching and listening to the politicians speak about our domestic economy, it is clear that they do not understand enough about the creation of credit, its movement from the borrow to the ultimate investor. There is plenty of cash in the hands of large pools of investible funds, such as public pension funds, but without confidence in the quality of the securitization of household debt, the movement of debt from borrow to investor grinds to a halt.
Stay tuned.
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8 comments:
I agree with all of that Fred, but the picture is incomplete. So much of our economic health is dependent on domestic spending, and to my mind, that spending has been cripple by the astronomical cost of credit - especially credit cards.
There is no Federal Usury law. there should be. there should be a standardization of Usury law across hte country, in the face of the Federal failure to pass such laws as would protect consumers.
And the Supreme Court's ruling allowing the 'export' of credit card business to states with 'better' Usury laws is (was) an outrage.
Big banks, with big money, can buy any kind of law they want - and it's about time that stopped.
Hi Fred,
Keep doing your political satire paintings. They are really very clever and hold quite complex levels of meaning. They are important.
Cheers,
Kathryn
Forgot to tick that I wanted to see follow up comments. So just making this comment so I can tick the box.Kathryn
Good point Lou about Federal Usury Laws. Corporations setting up in states where they can get away with things they can not get away with in other states creates opportunity for corporations, but not the borrowers. We need uniform laws if the corporation is in one state and they are lending to people in another state.
Thanks Kathryn. I intend to continue doing my political art work, and will also look at doing some other stuff too.
I'm glad you got to have your artwork exhibited, even if you didn't win. It's always nice to hear what people have to say about your work, and meet other artists.
Your blog has a lively comment section at least.
Even though interest in savings in the bank extremely low, I just thought of a good reason for having a savings account. It can be for making purchases under, say $5,000. It's better to save up and buy something like a computer with cash, rather than use a credit card and pay that high interest rate.
If bank savings accounts can prevent people from having to use consumer credit for smaller purchases, that saves one a lot more money than just the measly interest rates they pay.
Consumer credit can be a costly way to go for small purchases, but debit cards, for convenience make sense. Debit cards backed with saving in the bank.
These days, even $1000 can be considered a small purchase compared to, for instance, a mortgage payment.
Robert, you make a good point. People get themselves in trouble with credit cards and before they know it, they are paying big interest charges and the items they purchase costs them way more than the initial purchase price.
Having cash in a savings account should be taught to all children and Finance 101 could start as soon as children learn to add and subtract. Adding and subtracting is all that is going on away.
But, when we talk about our domestic economy, credit for business is essential. Buying a car so you can drive to work, or a truck to carry the tools to do your work, can be facilitated by credit being bundled, securitized and sold as debt instruments, known as bonds, to investors around the world. Investing in dollar denominated securities, such as car loans bonds, mortgage-backed bonds or manufactured housing bonds permits our domestic economy to grow.
The missing link is when the credit ratings on these structured debt obligations mean nothing to the investor, and the market for this debt dries up. Now we have a serious recession.
I have been trying for many months to make this clear, and while some know this to be true, those that need to make the changes refuse to be part of the solution.
It's true, I see little point in consumer debt for smaller purchases, but larger debt for things like equipment (cars for instance) and buildings "plant and equipment." is needed.
What you say about the corrupt way that the credit rating agencies are set up makes a lot of sense. When it can't be trusted, it dries up.
Seems like the Peter Principal rules when folks at the top of public policy don't get it.
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